Korean government’s 2024 policy direction to focus on tax benefits, deregulation

The South Korean government is set to unveil its economic policy direction for 2024 in January, which is expected to involve expansion in tax benefits such as the extension of tax credits for temporary investments.

According to government sources on Monday, the Ministry of Economy and Finance plans to announce the New Year’s economic policy direction in early January.

The ministry typically announces the plan at the end of the previous year but it will be the first time since the launch of the Ministry of Economy and Finance in February 2008 for the government to share the plan at the start of the New Year.

The timing has been delayed in conjunction with the year-end replacement of the Deputy Prime Minister and the Finance Minister.

The economic policy direction is expected to include the vision for dynamic economy presented by Choi Sang-mok, former chief economic advisor and nominee for the country’s finance minister.

The 2024 economic policy direction is expected to include various support measures to revive household consumption, a key component of domestic demand.

According to next year’s budget plan approved by the National Assembly last week, the budget assigned to cover interest rate reduction for loans to vulnerable small business owners increased by 300 billion won ($230 million).

Support for electricity bills for small businesses increased by 252 billion won and that for monthly rent assistance to youth has also been extended until next year, with an additional budget of 69 billion won. The youth rent assistance was originally scheduled to end this year.

The government is reportedly considering extending the deferral of capital gains tax for multiple homeowners for an additional year amid projections of a contraction in the construction and housing market.

While the deferral of capital gains tax for multiple homeowners is scheduled to end in May next year, the government is likely to be concerned about the impacts on domestic demand if the recent market slowdown leads to a slump.

To revitalize sluggish investments, the government is considering extending the temporary investment tax deductions. The government has been operating a temporary investment deduction system this year and both large and small enterprises are known to desire an extension of the tax credits.